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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Polkey v AE Dayton Services Ltd [1987] UKHL 8 (19 November 1987)
URL: http://www.bailii.org/uk/cases/UKHL/1987/8.html
Cite as: [1988] AC 344, [1988] 1 AC 344, [1987] UKHL 8, [1987] 3 All ER 974, [1988] ICR 142, [1987] IRLR 503, [1987] 3 WLR 1153

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JISCBAILII_CASE_EMPLOYMENT

    Polkey deduction

    The phrase 'Polkey deduction' has become a standard concept in UK Employment Tribunals, as a result of this case and later ones, meaning that even if a Tribunal decides a dismissal was unfair, it must separately decide whether the compensatory award is to be awarded in full, or be reduced by a percentage based on their estimate of the probability that the dismissal would have occurred anyway, even had a fair process been followed.

    Parliamentary Archives,
    HL/PO/JU/18/247

    Polkey (A.P.) (Appellant)

    v.

    A. E. Dayton Services Limited (Formerly Edmunds Walker
    (Holdings) Limited) (Respondents)

    JUDGMENT

    Die Jovis 19° Novembris 1987

    Upon consideration in the Cause Polkey (A.P.) against A.
    E. Dayton Services Limited (Formerly Edmunds Walker (Holdings)
    Limited), That the House had heard Counsel on Monday the
    12th, Tuesday the 13th and Wednesday the 14th days of October
    last upon the Petition and Appeal of Dennis Polkey, of 38
    Graham Street, Radford, Nottingham NG7 3HX praying that the
    matter of the Order set forth in the Schedule thereto, namely
    an Order of Her Majesty's Court of Appeal of 22nd October
    1986, might be reviewed before Her Majesty the Queen in Her
    Court of Parliament and that the said Order might be reversed,
    varied or altered or that the Petitioner might have such other
    relief in the premises as to Her Majesty the Queen in Her
    Court of Parliament might seem meet; as upon the Case of A. E.
    Dayton Services Limited (formerly Edmunds Walker (Holdings)
    Limited) lodged in answer to the said appeal; and due
    consideration had this day of what was offered on either side
    in this Cause:

    It is Ordered and Adjudged, by the Lords Spiritual and
    Temporal in the Court of Parliament of Her Majesty the Queen
    assembled, That the said Orders of Her Majesty's Court of
    Appeal (Civil Division) of the 22nd day of October 1986, and
    of the Employment Appeal Tribunal of the 2nd day of October
    1984 complained of in the said Appeal be, and the same are
    hereby, Reversed, save as to legal aid taxation; That the
    decision of the Industrial Tribunal of the 23rd day of
    February 1983 be, and the same is hereby Set Aside; and That
    the Cause be, and the same is hereby, remitted back to a
    differently constituted Industrial Tribunal to do therein as
    shall be just and consistent with this Judgment: And it is
    further Ordered, That the Respondents do pay or cause to be
    paid to the said Appellant the Costs incurred by him in the
    Court of Appeal and also the Costs incurred by him in respect
    of the said Appeal to this House; And it is also further
    Ordered, That the costs incurred by the Appellant in respect
    of the said appeal to this House be taxed in accordance with
    Schedule 2 to the Legal Aid Act 1974.

    Cler: Parliamentor

    Judgment: 19.11.87

    HOUSE OF LORDS

    POLKEY (A.P.)
    (APPELLANT)

    v.

    A. E. DAYTON SERVICES LIMITED

    (FORMERLY EDMUNDS WALKER (HOLDINGS) LIMITED)

    RESPONDENTS

    Lord Chancellor
    Lord Keith of Kinkel
    Lord Bridge of Harwich
    Lord Brandon of Oakbrook
    Lord Ackner


    LORD MACKAY OF CLASHFERN

    My Lords,

    The appellant was employed by the respondents ("the
    employers") from 19 June 1978 until 27 August 1982 as a van
    driver. On that date he was dismissed as redundant. On 8
    November 1982 he applied to an industrial tribunal to hold that he
    had been unfairly dismissed. On 23 February 1983 the industrial
    tribunal dismissed the application. It was accepted on behalf of
    the appellant before the industrial tribunal that at the time of his
    dismissal it was urgently necessary for the employers to reduce
    their overheads in their undertaking and that, in consequence, it
    was necessary to make certain of their van drivers redundant.
    They had three male van drivers and one female van driver and it
    was decided that for the future only two van salesmen should be
    appointed. The manager immediately responsible for the appellant
    decided that none of the three male van drivers was capable of
    performing the task of a van salesman but that the female van
    driver was so capable. Some four weeks after the appellant's
    dismissal a second van salesman was appointed from outside the
    employers' work-force. On 20 August the appellant's branch
    manager informed his superior of his decision and without any
    consultation with employees or their representative or earlier
    warning to the appellant his branch manager called him into his
    office on the afternoon of 27 August told him quite out of the
    blue that he was redundant and handed to him his redundancy
    letter. The appellant was immediately driven home by a fellow
    employee. The industrial tribunal characterised this aspect of the
    appellant's dismissal by saying: There could be no more heartless
    disregard of the provisions of the code of practice than that."

    The code of practice referred to is the statutory code presently in
    force under the Employment Protection Act 1975, Schedule 17,
    paragraph 4 in which paragraph *6 provides:


    "If redundancy becomes necessary, management in
    consultation, as appropriate, with employees or their
    representatives, should: (i) give as much warning as
    practicable to the employees concerned . . . ; (iii) establish
    which employees are to be made redundant and the order of
    discharge; . . ."

    The industrial tribunal further found: "There is nothing that
    excuses their failure to consult but" - this is the matter that gives
    rise to the point of principle in the present appeal -

    "at the end of the day we have no alternative but to find
    that in this case had they acted in accordance with the
    code of practice, as interpreted in the recent case [Williams
    v. Compair Maxam Ltd
    [1982] ICR 156], the result would
    not have been any different, and we have therefore
    unhappily to reject this application."

    The appellant appealed to the Employment Appeal Tribunal but on
    his behalf it was conceded that the appeal tribunal was bound by
    authority to dismiss the appeal. The only question the Employment
    Appeal Tribunal had to consider was whether to give leave to
    appeal which they did. The Court of Appeal, Neill and Nicholls
    L.JJ. and Sir George Waller [1987] 1 W.L.R. 1147, dismissed the
    appeal, held that they were bound by authority to do so, and
    granted leave to the appellant to appeal to this House.

    This appeal raises an important question in the law of unfair
    dismissal. Where an industrial tribunal has found that the reason
    for an applicant's dismissal was a reason of a kind such as could
    justify the dismissal and has found that there has been a failure to
    consult or warn the applicant in accordance with the code of
    practice, should the tribunal consider whether, if the employee had
    been consulted or warned before dismissal was decided upon, he
    would nevertheless have been dismissed? The answer depends upon
    the application to this situation of section 57(3) of the
    Employment Protection (Consolidation) Act 1978 as amended, which
    is in these terms:

    "Where the employer has fulfilled the requirements of
    subsection (1), then, subject to subsections 58 to 62, the
    determination! of the question whether the dismissal was fair
    or unfair, having regard to the reason shown by the
    employer, shall depend on whether in the circumstances
    (including the size and administrative resources of the
    employer's undertaking) the employer acted reasonably or
    unreasonably in treating it as a sufficient reason for
    dismissing the employee; and that question shall be
    determined in accordance with equity and the substantial
    merits of the case."

    Where there is no issue raised by sections 58 to 62 the
    subject matter for the tribunal's consideration is the employer's
    action in treating the reason as a sufficient reason for dismissing
    the employee. It is that action and that action only that the

    - 2 -

    tribunal is required to characterise as reasonable or unreasonable.
    That leaves no scope for the tribunal considering whether, if the
    employer had acted differently, he might have dismissed the
    employee. It is what the employer did that is to be judged, not
    what he might have done. On the other hand, in judging whether
    what the employer did was reasonable it is right to consider what
    a reasonable employer would have had in mind at the time he
    decided to dismiss as the consequence of not consulting or not
    warning.

    If the employer could reasonably have concluded in the light
    of the circumstances known to him at the time of dismissal that
    consultation or warning would be utterly useless he might well act
    reasonably even if he did not observe the provisions of the code.
    Failure to observe the requirement of the code relating to
    consultation or warning will not necessarily render a dismissal
    unfair. Whether in any particular case it did so is a matter for
    the industrial tribunal to consider in the light of the circumstances
    known to the employer at the time he dismissed the employee.

    I turn to consider how these views accord with the decided
    cases. Very early in the history of this legislation and its
    statutory predecessors Sir John Donaldson in Earl v. Slater &
    Wheeler (Airlyne) Ltd.
    [1973] 1 W.L.R. 51, 57 said:

    "With respect to the tribunal, we think that it erred in
    holding that an unfair procedure which led to no injustice is
    incapable of rendering unfair a dismissal which would
    otherwise be fair. The question in every case is whether
    the employer acted reasonably or unreasonably in treating
    the reason as sufficient for dismissing the employee and it
    has to be answered with reference to the circumstances
    known to the employer at the moment of dismissal. If an
    employer thinks that his accountant may be taking the
    firm's money, but has no real grounds for so thinking and
    dismisses him for this reason, he acts wholly unreasonably
    and commits the unfair industrial practice of unfair
    dismissal, notwithstanding that it is later proved that the
    accountant had in fact been guilty of embezzlement. Proof
    of the embezzlement affects the amount of the
    compensation, but not the issue of fair or unfair dismissal."

    Again in Vokes Ltd, v. Bear [1974] I.C.R. 1, 5 Sir Hugh
    Griffiths, referring to the statutory predecessor of this section,
    said:

    "We are unable to accept the submission that 'the
    circumstances' are limited to those directly affecting the
    ground of dismissal, in the sense submitted by [counsel for
    the employers], 'The circumstances' embrace all relevant
    matters that should weigh with a good employer when
    deciding at a given moment in time whether or not he
    should dismiss his employee. The subsection [section 24(6)
    of the Industrial Relations Act 1971] is focusing the
    tribunal's attention upon 'the dismissal', that is, the
    dismissal on March 2. The question they have to ask
    themselves is whether on March 2 the employers were
    acting reasonably in treating redundancy as a sufficient
    reason for dismissing the employee on that date. The

    - 3 -

    tribunal are entitled to take into account all the
    circumstances affecting both the employers and the
    employee at the time of the dismissal. In the present case,
    no doubt the time would have come when the employers
    would have to dismiss the employee for redundancy for the
    good of the company as a whole, but the tribunal were fully
    entitled to take the view that that moment had not yet
    arrived by March 2. The employers had not yet done that
    which in all fairness and reason they should do, namely, to
    make the obvious attempt to see if the employee could be
    placed somewhere else within this large group. The position
    is somewhat analogous to the case of a warning. An
    employer may have good grounds for thinking that a man is
    not capable of doing his job properly, but in the general run
    of cases it will not be reasonable for him to regard that
    lack of capability as a sufficient reason for dismissing him
    until he is given a warning so that the man has a chance to
    show if he can do better. So in this case there was a
    redundancy situation but there was no compelling reason why
    the axe should fall until the employers had done their best
    to help the employee. It is therefore with satisfaction that
    we find that there is nothing in the wording of section 24(6)
    of the Act of 1971 which compels us to take the view that
    behaviour which we think most people would consider
    manifestly unfair is nevertheless to be deemed fair under
    the Act. If the employers had made all reasonable attempts
    to place the employee in the group and had failed, then the
    time might have come when it would be reasonable for
    them to regard the redundancy as a sufficient reason for
    the dismissal, but until that moment had come the tribunal
    were entitled to take the view that it was not reasonable to
    dismiss for redundancy and accordingly that it was unfair."

    This approach to the legislation was endorsed in this House
    in W. Devis & Sons Ltd, v. Atkins [1977] AC 931. Viscount
    Dilhorne, in a speech with which the other members of the House
    sitting in the appeal agreed, said of the statutory predecessor of
    section 57(3), at p. 952:

    "It [paragraph 6(8) of Schedule 1 to the Trade Union and
    Labour Relations Act 1971] appears to me to direct the
    tribunal to focus its attention on the conduct of the
    employer and not on whether the employee in fact suffered
    any injustice."

    After quoting, with approval, the principal part of the
    passage I have already cited from Sir John Donaldson in Earl v.
    Slater & Wheeler (Airlyne) Ltd,
    and after referring to the
    statutory provision then entitling the tribunal to take the code into
    account Viscount Dilhorne said, at p. 955:

    "It does not follow that non-compliance with the code
    necessarily renders a dismissal unfair, but I agree with the
    view expressed by Sir John Donaldson in Earl v. Slater &
    Wheeler (Airlyne) Ltd.
    [1973] 1 W.L.R. 51 that a failure to
    follow a procedure prescribed in the code may lead to the
    conclusion that a dismissal was unfair, which, if that
    procedure had been followed, would have been held to have
    been fair."

    - 4 -

    So far, the current of decision is entirely in accordance
    with the views I have expressed, but the tribunal in the present
    case were bound by a stream of authority applying the so-called
    British Labour Pump principle [British Labour Pump Co. Ltd, v.
    Byrne. [1979] I.C.R. 347].

    Browne-Wilkinson J. in Sillifant v. Powell Duffryn Timber
    Ltd. [1983] I.R.L.R. 91 thus described the principle, at p. 92:

    "even if, judged in the light of the circumstances known at
    the time of dismissal, the employer's decision was not
    reasonable because of some failure to follow a fair
    procedure yet the dismissal can be held fair if, on the
    facts proved before the industrial tribunal, the industrial
    tribunal comes to the conclusion that the employer could
    reasonably have decided to dismiss if he had followed a fair
    procedure."

    It is because one of its statements is contained in British Labour
    Pump Co. Ltd, v. Byrne
    that it has been called the British Labour
    Pump
    principle although it did not originate in that decision. In
    Sillifant's case the Employment Appeal Tribunal were urged to hold
    that the principle was unsound and not to give effect to it. After
    referring to the cases which introduced this principle, namely
    Charles Letts & Co. Ltd v. Howard [1976] I.R.L.R. 248 a decision
    relating only to compensation, Lowndes v. Specialist Heavy
    Engineering Ltd.
    [1977] I.C.R. 1, British United Shoe Machinery Co.
    Ltd, v. Clarke
    [1978] ICR 70 and the British Labour Pump case
    itself, Brown-Wilkinson J. continued, at p. 97:

    "Apart therefore from recent Court of Appeal authority and
    the Lowndes case, the British Labour Pump principle appears
    to have become established in practice without it being
    appreciated that it represented a fundamental departure
    from both basic principle and the earlier decisions. If we
    felt able to do so we would hold that it is wrong in
    principle and undesirable in its practical effect. It
    introduces just that confusion which Devis v. Atkins was
    concerned to avoid between the fairness of the dismissal
    (which depends solely upon the reasonableness of the
    employer's conduct) and the compensation payable to the
    employee (which takes into account the conduct of the
    employee whether known to the employer or not). In our
    judgment, apart from the authority to which we are about
    to refer, the correct approach to such a case would be as
    follows. The only test of the fairness of a dismissal is the
    reasonableness of the employer's decision to dismiss judged
    at the time at which the dismissal takes effect. An
    industrial tribunal is not bound to hold that any procedural
    failure by the employer renders the dismissal unfair: it is
    one of the factors to be weighed by the industrial tribunal
    in deciding whether or not the dismissal was reasonable
    within section 57(3). The weight to be attached to such
    procedural failure should depend upon the circumstances
    known to the employer at the time of dismissal, not on the
    actual consequence of such failure. Thus in the case of a
    failure to give an opportunity to explain, except in the rare
    case where a reasonable employer could properly take the
    view on the facts known to him at the time of dismissal

    -5-

    that no explanation or mitigation could alter his decision to
    dismiss, an industrial tribunal would be likely to hold that
    the lack of 'equity' inherent in the failure would render the
    dismissal unfair. But there may be cases where the offence
    is so heinous and the facts so manifestly clear that a
    reasonable employer could, on the facts known to him at
    the time of dismissal, take the view that whatever
    explanation the employee advanced it would make no
    difference: see the example referred to by Lawton L.J. in
    Bailey v. B. P. Oil (Kent Refinery) Ltd. [1980] I.C.R. 642.
    Where, in the circumstances known at the time of dismissal,
    it was not reasonable for the employer to dismiss without
    giving an opportunity to explain but facts subsequently
    discovered or proved before the industrial tribunal show that
    the dismissal was in fact merited, compensation would be
    reduced to nil. Such an approach ensures that an employee
    who could have been fairly dismissed does not get
    compensation but would prevent the suggestion of 'double
    standards' inherent in the British Labour Pump principle.
    An employee dismissed for suspected dishonesty who is in
    fact innocent has no redress: if the employer acted fairly
    in dismissing him on the facts and in the circumstances
    known to him at the time of dismissal the employee's
    innocence is irrelevant. Why should an employer be entitled
    to a finding that he acted fairly when, on the facts known
    and in the circumstances existing at the time of dismissal,
    his actions were unfair but which facts subsequently coming
    to light show did not cause any injustice? The choice in
    dealing with section 57(3) is between looking at the
    reasonableness of the employer or justice to the employee.
    Devis v. Atkins shows that the correct test is the
    reasonableness of the employer; the British Labour Pump
    principle confuses the two approaches."

    I gratefully adopt that analysis. The Employment Appeal
    Tribunal, however, went on to hold that they were bound by the
    decision of the Court of Appeal in W. & J. Wass Ltd, v. Binns
    [1982] I.C.R. 486 which held that the British Labour Pump
    principle is good law and to that decision of the Court of Appeal I
    must now turn.

    In that case an employee was dismissed for misconduct
    which had occurred on the morning of the day on which he was
    dismissed. There was evidence of previous misbehaviour by the
    employee but the industrial tribunal held that the case had to be
    determined on the basis of what had happened on that morning and
    that the employers had acted reasonably and had fairly dismissed
    the employee even though they had not warned him about his
    previous misbehaviour or given him an opportunity to explain his
    conduct on that morning. The industrial tribunal decided that even
    if there had been an investigation the employee would still have
    been dismissed because on the balance of probabilities the
    employers would not have accepted his explanation and the
    dismissal was therefore fair. The Employment Appeal Tribunal
    reversed the decision of the industrial tribunal but the Court of
    Appeal, Waller and O'Connor L.JJ and Sir George Baker, Sir
    George Baker dissenting, restored the decision of the industrial
    tribunal. Waller L.J. said, at p. 493:

    - 6 -

    "[Counsel for the employer] submitted that the test in the
    British Labour Pump case goes further than section 57(3) of
    the Employment Protection (Consolidation) Act 1978
    requires, and submits that it is the statutory test which
    must be complied with. This in my opinion is strictly
    correct, and if the employer and the industrial tribunal are
    satisfied in an exceptional case that no opportunity to
    explain need be offered and that the employer in the
    circumstances acted reasonably in accordance with equity
    and the substantial merits of the case, the test would not
    apply. But since in the majority of cases fairness would
    require an opportunity to explain, as indeed many industrial
    contracts provide, then in such cases the British Labour
    Pump
    case provides useful guidelines. It was argued by
    [counsel for the employee] that the British Labour Pump
    case was itself not in accordance with the observations of
    Viscount Dilhorne in W. Devis &. Sons Ltd, v. Atkins [1977]
    A.C 931, 949-958. That case was dealing with a different
    point, namely, whether a dismissal can be justified as fair
    when the fact, or facts, are not known at the time of
    dismissal but are discovered afterwards. I do not find
    anything in the speech of Viscount Dilhorne which throws
    doubt on the reasoning of the decision in the British Labour
    Pump
    case."

    At p. 496, O'Connor L.J. after holding that the employee's
    conduct on the morning of dismissal justified summary dismissal
    went on to consider the industrial tribunal's finding that the
    explanation proffered by the employee was not acceptable. He

    said:

    "For my part I think that once the industrial tribunal made
    that finding they would have been entitled to say that the
    employee had not been prejudiced in any way by not being
    asked to explain his conduct and that the dismissal was fair.
    The industrial tribunal in fact applied the British Labour
    Pump Co. Ltd, v. Byrne
    test and found in favour of the
    employers. I can find no ground for disturbing that finding.
    I do not think that any question of law was raised before
    the Employment Appeal Tribunal. I am satisfied that the
    decision of the industrial tribunal was not perverse. I see
    no reason for disturbing it."

    Sir George Baker said, at pp. 498-499:

    "the failure to give the employee any opportunity to explain
    why he should not be dismissed seems to me to be in the
    circumstances of this case a denial of natural justice which
    elimated equity or fair play. There are cases where instant
    dismissal without an opportunity of explaining would be fair.
    . . . Then there must be many cases where it is clearly
    for the tribunal to decide whether, in the words of
    Stephenson L.J. in W. Weddell & Co. Ltd, v. Tepper [1980]
    I.C.R. 286, 297, the employers have acted 'without making
    the appropriate enquiries or giving the employee a fair
    opportunity to explain himself. . . .' Viscount Dilhorne in
    his speech in W. Devis & Sons Ltd, v. Atkins [1977] A.C.
    931. . . said, at p. 953: 'If, however, the reasons shown
    appear to have been a sufficient reason, it cannot, in my

    - 7 -

    opinion, be said that the employer acted reasonably in
    treating it as such if he only did so in consequence of
    ignoring matters which he ought reasonably to have known
    and which would have shown that the reason was
    insufficient.'

    Like Waller L.J. I do not think that this throws any doubt
    on the reasoning in the later decision of the Employment
    Appeal Tribunal (Slynn J.) in British Labour Pump Co. Ltd,
    v. Byrne
    [1979] I.C.R. 347 which the industrial tribunal in
    the present case purported to apply as the right test."

    He went on to conclude on the evidence, differing in this respect
    from his colleagues, that the evidence did not show that after the
    employee had given his explanation the employers would probably
    still have dismissed him and for this reason he held the dismissal
    was unfair. The opinions of the Court Appeal thus do not add to
    the reasoning in the cases examined by Browne-Wilkinson J. in
    Sillifant.

    The only other Court of Appeal decision remaining for
    consideration that supports the British Labour Pump principle is
    that in the present case [1987] 1 W.L.R. 1147. The Court of
    Appeal held themselves bound by the decision in W. & J. Wass
    Ltd, v. Binns
    and, in my opinion, they were clearly right in that
    aspect of their decision. Neill L.J., taking up the point which
    had been described by Browne-Wilkinson J. as the double standards
    aspect of the British Labour Pump principle, says, at pp. 1153-
    1154:

    "The question can then be asked: if an employer cannot
    justify dismissal and if an employee cannot complain of a
    dismissal on the basis of facts not known to the employer
    at the time of dismissal, how can it be right for an
    industrial tribunal to embark on the speculative exercise of
    examining facts which were not known to the employer at
    the time of dismissal in order to decide whether a
    procedural defect made any difference? At first sight, this
    question appears to require the answer that such an exercise
    would be contrary to the decision in W. Devis & Sons Ltd,
    v. Atkins
    [1977] AC 931 because it would allow an
    employer to rely on facts not known to him at the time of
    dismissal, or, where an internal appeal procedure has been
    put in operation, not known to him at the time when the
    final decision: to uphold the dismissal was taken. On further
    analysis, however, it seems to me that an answer on these
    lines overlooks the crucial distinction between the reason for
    a dismissal and the manner in which the dismissal is
    effected."

    After reference to the statutory provision he goes on, at pp.
    1154-1156:

    "It will be seen therefore that a complaint of unfair
    dismissal will succeed where the employer fails to establish
    that the reason for dismissal was one of those specified in
    section 57(2) or where the tribunal reaches the conclusion
    that even though the employer has fulfilled the requirements
    of section 57(1) he acted unreasonably in treating the

    - 8 -

    reasons shown by him as a sufficient reason for dismissing
    the employee. But, on the other hand, a complaint of
    unfair dismissal will not succeed merely because of the
    manner in which the dismissal was carried out. A failure to
    observe a proper procedure may make a dismissal unfair, but
    this is not because such failure by itself makes the dismissal
    unfair, but because the failure, for example, to give an
    employee an opportunity to explain may lead the tribunal to
    the conclusion that the employer, in the circumstances,
    acted unreasonably in treating the reason for dismissal as a
    sufficient reason. The tribunal will look at the practical
    effect of the failure to observe the proper procedure in
    order to decide whether or not the dismissal was unfair.
    Where an employee is dismissed for alleged misconduct and
    he then complains that he was unfairly dismissed, it is to be
    anticipated that the industrial tribunal will usually need to
    consider (a) the nature and gravity of the alleged
    misconduct; (b) the information on which the employer based
    his decision; (c) whether there was any other information
    which the employer could or should have obtained or any
    other step which he should have taken before he dismissed
    the employee. Similarly, in a case of alleged redundancy, it
    is to be anticipated that the industrial tribunal will usually
    need to consider (a) the information on which the employer
    based his decision to dismiss the employee as redundant and
    the method of selection which he used and (b) whether
    there was any other information which the employer could
    or should have obtained or any other step which he should
    have taken before he dismissed the employee. In some
    cases of misconduct, however, the misconduct may be so
    grave and the information available to the employer so clear
    that the tribunal will be likely to conclude that no further
    inquiries by the employer were necessary .... But in many
    cases of misconduct, the tribunal will need to consider
    whether the employer, either in accordance with some
    disciplinary procedure or otherwise, should have taken steps
    to obtain further information either from the employee or
    from elsewhere because such information might throw light
    on the sufficiency of the employer's reason for dismissal.
    But the failure to obtain this information does not ipso
    facto render the dismissal unfair, and it seems to me to be
    both logical and desireable to require the industrial tribunal
    to try to evaluate the effect in practice of the failure.
    Thus, as [counsel for the employees] acknowledged, there
    may be cases where the evidence of misconduct is not so
    clear as to justify instant dismissal and which could be
    capable of explanation, but where, on examination, the
    employee has no explanation to put forward. In such a
    case, the failure to seek an explanation from the employee,
    which fairness would in principle require, will not make any
    difference. In a case where dismissal is on the ground of
    redundancy, the matter may have to be looked at rather
    differently because the system adopted for the selection of
    the individual for redundancy may be at the very centre of
    the inquiry when the tribunal comes to determine whether
    the employer has acted reasonably or unreasonably in
    treating redundancy as a sufficient reason for dismissing the
    employee concerned. The decision of the appeal tribunal In
    Williams v Compair Maxam Ltd. [1982] ICR 156

    - 9 -

    demonstrates the importance of the use of a fair system.
    Furthermore, it is to be noted that section 59 of the Act of
    1978 contains special provisions rendering dismissal on the
    ground of redundancy unfair .... But where section 59
    does not apply, it seems to me to be proper and indeed
    necessary for the tribunal to investigate the effect of the
    failure to consult the employee or to warn him or to hold
    discussions or as the case may be. In some cases, the facts
    may show beyond peradventure that no discussions or other
    steps could have made any difference whatever because the
    state of the company was so grave. In other cases, the
    matter will be more evenly balanced. But, for my part, I
    can see no objection in principle to the tribunal seeking to
    evaluate the effect in practice of any failure by the
    employer to observe the provisions of a code of practice or
    of the guidelines prescribed in cases such as Williams v.
    Compair Maxam Ltd..
    . . . Prima facie, as the reason for
    dismissal was redundancy, the reason was a valid reason.
    The failure to consult did not automatically render the
    dismissal unfair; it was for the tribunal to determine
    whether that failure showed that the employers had acted
    reasonably or unreasonably in treating redundancy as a
    sufficient reason for the dismissal of the employee. For
    that purpose, they had to look at all the circumstances
    including the consequences of the failure."

    In my opinion, the learned Lord Justice's answer on first
    sight was correct. With much of what he says I would
    respectfully agree but I cannot accept it all. For example in
    referring to a case of dismissal for misconduct where the evidence
    of misconduct could be capable of explanation and no explanation
    has been invited before dismissal the examination of which the
    learned Lord Justice speaks is an examination of matters other
    than the employer's conduct which could not be known to the
    employers until after the decision to dismiss had been reached and
    therefore it was not available to the employer at the time he
    reached that decision. Perhaps the point is highlighted most
    plainly in the very last sentence which I have quoted. The
    consequences of the failure determine whether or not the employee
    suffered an injustice. This is not to be confused with the question
    whether the employer acted reasonably.

    Further, in my opinion, the statutory test shows that at
    least some aspects of the manner of dismissal fall to be
    considered in considering whether a dismissal is unfair since the
    action of the employer in treating the reason as sufficient for
    dismissal of the employee will include at least part of the manner
    of the dismissal. Accordingly, it is not correct to draw a
    distinction between the reason for dismissal and the manner of
    dismissal as if these were mutually exclusive, with the industrial
    tribunal limited to considering only the reason for dimissal.
    Nicholls L.J. agreed with Neill L.J. as did Sir George Waller. Sir
    George, however, added some observations.

    At p. 311, he said:

    "The industrial tribunal, having inquired into what would
    have happened if the code of practice had been complied
    with, came to the conclusion that it would have made no

    - 10 -

    difference. In other words, the employers acted reasonably
    in treating redundancy as a sufficient reason for dismissing
    the employee."

    In my view, with great respect, these two sentences show
    that Sir George was treating the question whether the employee
    had suffered injustice as the same question as whether the
    employer had acted 'reasonably.

    In my opinion, therefore, the additional reasons given by the
    Court of Appeal in the present case for supporting the British
    Labour Pump
    principle involve an impermissible reliance upon
    matters not known to the employers before the dismissal and a
    confusion between unreasonable conduct in reaching the conclusion
    to dismiss, which is a necessary ingredient of an unfair dismissal,
    and injustice to the employee which is not a necessary ingredient
    of an unfair dismissal, although its absence will be important in
    relation to a compensatory award.

    It follows that I do not agree with the decision of the
    Court of Appeal in the present case and this appeal should be
    allowed, the British Labour Pump principle and all decisions
    supporting it are inconsistent with the relevant statutory provision
    and should be overruled and, in particular, the decision of the
    Court of Appeal in W. & J. Wass Ltd, v. Binns [1982] LC.R. 486
    should be overruled. "

    That leaves for consideration the appropriate form of order
    to be made by the House. Counsel for the appellant asked that
    the House should hold that the appellant's dismissal had been
    unfair and remit the case to the tribunal to consider remedy.
    Counsel for the employers, while accepting that the British Labour
    Pump
    principle and W. & J. Wass Ltd, v. Binns were wrong and
    that accordingly the industrial tribunal had applied the wrong test
    in coming to its conclusion, submitted that on the findings of the
    tribunal supplemented by the evidence the tribunal were bound to
    hold that the dismissal was fair since a reasonable employer
    considering the facts known to this employer at the date of the
    dismissal could reasonably have concluded that observance of the
    code would make no difference to the conclusion.

    The notes of evidence available to your Lordships are
    necessarily only a brief summary and the tribunal's findings do not
    deal exhaustively with all the matters that appear to have been
    raised in the evidence; in particular they do not deal with the
    evidence that appears to have related to an appeal by the
    appellant to the employers to rescind the dismissal. In these
    circumstances I consider that no adequate basis exists for your
    Lordships to determine whether this dismissal was fair or unfair.
    The industrial tribunal asked themselves the wrong question when
    they applied the British Labour Pump principle. It is not apparent
    what their answer would have been if they had asked themselves
    the correct question. In my opinion the proper course is to remit
    this case to a new industrial tribunal for consideration in the light
    of your Lordships' judgment. The respondents must bear the
    appellant's costs in the Court of Appeal and in this House.

    - 11 -

    LORD KEITH OF KINKEL

    My Lords,

    I have had the opportunity of considering in draft the
    speech delivered by my noble and learned friend on the Woolsack.
    I agree with it, and for the reasons he gives would allow the
    appeal and remit the case to an' industrial tribunal differently
    constituted.

    LORD BRIDGE OF HARWICH

    My Lords,

    I have had the advantage of reading in draft the speech of
    my noble and learned friend the Lord Chancellor and I agree with
    it. I add some short observations of my own because of the
    importance of the case.

    Employers contesting a claim of unfair dismissal will
    commonly advance as their reason for dismissal one of the reasons
    specifically recognised as valid by section 57(2)(a), (b) and (c) of
    the Employment Protection (Consolidation) Act 1978. These, put
    shortly, are: (a) that the employee could not do his job properly;
    (b) that he had been guilty of misconduct; (c) that he was
    redundant. But an employer having prima facie grounds to dismiss
    for one of these reasons will in the great majority of cases not
    act reasonably in treating the reason as a sufficient reason for
    dismissal unless and until he has taken the steps, conveniently
    classified in most of the authorities as "procedural," which are
    necessary in the circumstances of the case to justify that course
    of action. Thus, in the case of incapacity, the employer will
    normally not act reasonably unless he gives the employee fair
    warning and an opportunity to mend his ways and show that he
    can do the job; in the case of misconduct, the employer will
    normally not act reasonably unless he investigates the complaint of
    misconduct fully and fairly and hears whatever the employee
    wishes to say in his defence or in explanation or mitigation; in the
    case of redundancy, the employer will normally not act reasonably
    unless he warns and consults any employees affected or their
    representative, adopts a fair basis on which to select for
    redundancy arid takes such steps as may be reasonable to avoid or
    minimise redundancy by redeployment within his own organisation.
    If an employer has failed to take the appropriate procedural steps
    in any particular case, the one question the industrial tribunal is
    not permitted to ask in applying the test of reasonableness posed
    by section 57(3) is the hypothetical question whether it would have
    made any difference to the outcome if the appropriate procedural
    steps had been taken. On the true construction of section 57(3)
    this question is simply irrelevant. It is quite a different matter if
    the tribunal is able to conclude that the employer himself, at the
    time of dismissal, acted reasonably in taking the view that, in the
    exceptional circumstances of the particular case, the procedural
    steps normally appropriate would have been futile, could not have
    altered the decision to dismiss and therefore could be dispensed
    with. In such a case the test of reasonableness under section
    57(3) may be satisfied.

    - 12 -

    My Lords, I think these conclusions are fully justified by the
    cogent reasoning of Browne-Wilkinson J. in Sillifant v. Powell
    Duffryn Timber Ltd.
    [1983] I.R.L.R. 91 to which my noble and
    learned friend the Lord Chancellor has already drawn attention.

    If it is held, that taking the appropriate steps which the
    employer failed to fake before dismissing the employer would not
    have affected the outcome, this will often lead to the result that
    the employee, though unfairly dismissed, will recover no
    compensation or, in the case of redundancy, no compensation in
    excess of his redundancy payment. Thus in Earl v. Slater &
    Wheeler (Airlyne) Ltd.
    [1973] 1 W.L.R. 51 the employee was held
    to have been unfairly dismissed, but nevertheless lost his appeal to
    the Industrial Relations Court because his misconduct disentitled
    him to any award of compensation, which was at that time the
    only effective remedy. But in spite of this the application of the
    so-called British Labour Pump principle [British Labour Pump Co.
    Ltd v. Byrne] [1979] I.C.R. 347]
    tends to distort the operation of
    the employment protection legislation in two important ways.
    First, as was pointed out by Browne-Wilkinson J. in Sillifant's case,
    if the industrial tribunal, in considering whether the employer who
    has omitted to take the appropriate procedural steps acted
    reasonably or unreasonably in treating his reason as a sufficient
    reason for dismissal, poses for itself the hypothetical question
    whether the result would have been any different if the
    appropriate procedural steps had been taken, it can only answer
    that question on a balance of probabilities. Accordingly, applying
    the British Labour Pump principle, if the answer is that it
    probably would have made no difference, the employee's unfair
    dismissal claim fails. But if the likely effect of taking the
    appropriate procedural steps is only considered, as it should be, at
    the stage of assessing compensation, the position is quite different.
    In that situation, as Browne-Wilkinson J. puts it in Sillifant's case,
    at p. 96:

    "There is no need for an 'all or nothing' decision. If the
    industrial tribunal thinks there is a doubt whether or not the
    employee would have been dismissed, this element can be
    reflected by reducing the normal amount of compensation by
    a percentage representing the chance that the employee
    would still have lost his employment."

    The second consideration is perhaps of particular importance in
    redundancy cases. An industrial tribunal may conclude, as in the
    instant case, that the appropriate procedural steps would not have
    avoided the employee's dismissal as redundant. But if, as your
    Lordships now hold, that conclusion does not defeat his claim of
    unfair dismissal, the industrial tribunal, apart from any question of
    compensation, will also have to consider whether to make any
    order under section 69 of the Act of 1978. It is noteworthy that
    an industrial tribunal may, if it thinks fit, make an order for re-
    engagement under that section and in so doing exercise a very
    wide discretion as to the terms of the order. In a case where an
    industrial tribunal held that dismissal on the ground of redundancy
    would have been inevitable at the time when it took place, even if
    the appropriate procedural steps had been taken, I do not, as at
    present advised, think this would necessarily preclude a
    discretionary order for re-engagement on suitable terms, if the

    - 13 -

    altered circumstances considered by the tribunal at the date of the
    hearing were thought to justify it.

    For these reasons and for those given by my noble and
    learned friend the Lord Chancellor I would allow the appeal and
    remit the case to be heard by another industrial tribunal.

    LORD BRANDON OF OAKBROOK

    My Lords,

    I have had the advantage of reading in draft the speech
    delivered by my noble and learned friend, on the Woolsack. I
    agree with it, and for the reasons which he gives I would allow
    the appeal and remit the case to a new industrial tribunal.

    LORD ACKNER

    My Lords,

    I have had the advantage of reading in draft the speech
    delivered by my noble and learned friend on the Woolsack, . I
    agree with it, and for the reasons which he gives I would allow
    the appeal and remit the case to a new industrial tribunal.

    - 14 -


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